We commend the Committee for demanding answers to the breakdowns in the SEC’s investigation, particularly at the Ft. Worth Regional Office. The OIG’s investigation revealed that Ft. Worth examiners began flagging Stanford’s operations as a possible Ponzi scheme as early as 1997, and conducted four examinations confirming that Stanford was in violation of federal securities laws. But the Ft. Worth enforcement team largely ignored the examiners’ findings, and the SEC didn’t bring charges against Stanford until 2009 after the agency’s failures from the Madoff investigation were exposed. The OIG reported that the enforcement team was slow to investigate Stanford in part because of the Ft. Worth office’s preference for “quick hit” cases, an issue that received a great deal of attention at yesterday’s hearing.

But these were hardly the only problems exposed by the SEC’s failed investigation of Stanford. Over the past few months, we’vebeenhighlighting a separate OIG report on recent allegations of whistleblower retaliation at the Ft. Worth office. The OIG’s investigation found that Ft. Worth officials retaliated against a veteran examiner and her deputy for blowing the whistle on a new initiative that would have required the exam team to focus on stats over substance.

The SEC initially tried to block the release of the OIG’s report in its entirety. But a story by Zach Goldfarb at The Washington Post described the controversy that erupted when Ft. Worth officials announced the new “quick hit” exam program, and revealed that one of the whistleblowers was the same examiner who had tried for years to get the Ft. Worth enforcement team to crack down on Stanford.

A few weeks later, Darren Barbee at the Fort Worth Star-Telegram revealed that the SEC was ignoring the OIG’s recommendations for disciplinary action against the officials who had retaliated against the Ft. Worth whistleblowers. Barbee also reported that one of those officials, Ft. Worth Regional Director Rose Romero, appears to have given misleading testimony at a previous Senate Banking Committee hearing when asked about the SEC’s history of investigating Stanford. As we pointed out earlier this week, Romero was one of the witnesses at yesterday’s hearing.

Needless to say, we were very pleased to see Members of the Committee raise questions yesterday about the whistleblower retaliation issue, the SEC’s redacting and withholding of OIG reports, and Romero’s previous testimony. Here are just a few highlights:

Chairman Christopher Dodd, D-Conn., asked SEC Inspector General David Kotz about the Post story on whistleblower retaliation at the Ft. Worth office, and requested more information on the ongoing conflicts between the enforcement and examination divisions:

Senator Jim Bunning, R-Ky., asked Kotz why he doesn’t have the authority to redact and post his own investigative reports, and suggested that legislation may be necessary to give the OIG this authority:

Senator Bunning also asked Kotz about the Ft. Worth enforcement official who repeatedly tried to represent Stanford after leaving the SEC:

And Senator David Vitter, R-La., confronted Romero on her previous misleading testimony: